cash advance Credit Cards

Credit Card Processing and Business Cash Advances by Stephen Bush

A thorough review of basic working capital financing practices should be helpful to most commercial borrowers because many businesses have experienced increased difficulty with both decreased sales and the lack of adequate bank financing. For even the most successful small business, the possibility of reducing a significant business expense is likely to be appealing. If small business owners can increase their cash flow with a merchant cash advance while cutting credit card processing costs, it will usually be a good idea to get back to basics when considering their overall commercial finance options.

While they will not be discussed here, there are other working capital financing options to consider for a business which does not accept credit cards from customers as a payment option. In most cases, to obtain business funding based upon credit card factoring requires a minimum monthly volume of credit card sales which typically varies from $5000 to $10000. A lump sum payment is received based on projected future credit card processing transactions when merchant cash advances are obtained by a business. As credit card purchases are processed, the business financing is repaid automatically and gradually (typically covering about seven to eight months). Because they do not have another reliable commercial funding source, this strategy for obtaining working capital is used by many diverse businesses. Because banks are routinely reducing or eliminating business lines of credit in almost all areas for small businesses, the practical need to consider this option has also increased.

This might be the perfect opportunity to review the cost structure currently in place for a business because this approach to working capital management is tied so directly to credit card processing activity. Many small business owners chose their credit card processor based upon a recommendation from a colleague or banker. It is not unusual to hear that costs or terms were not reviewed thoroughly before signing a processing agreement.

As noted, business cash advances are repaid by using future credit card processing activity. A portion of each transaction is automatically allocated toward repayment. In order for this to happen, the processor must agree in advance to handle it properly. Some providers of credit card processing will not agree to help with the payment process required to repay a merchant cash advance. When this occurs, alternative processors can usually be arranged with minimal impact on daily business operations. A common occurrence is for a small business to realize significant cost reductions when replacing one credit card processing provider with another because costs were often overlooked when the initial agreement was signed.

Ensuring that the company providing the business financing does not rush to change credit card processors before determining if they can complete the desired working capital financing is one of the primary precautions to observe when a small business owner is considering a business cash advance. During the past several years, one of the most serious abuses seen for companies appearing to offer merchant cash advances is indicated when they try to change processing arrangements immediately. An initial evaluation of whether they can provide financing and in what amount is a more normal and appropriate approach for the commercial funding provider to take. Checking with the existing processor to determine their ability to facilitate repayment of the working capital to be advanced to the business borrower would then be the next step if the initial findings were acceptable to the business. While it might not be a normal way to proceed, some businesses should consider asking for a review of cost saving opportunities involving their credit card processing even if their current processor is willing to work with the business cash advance provider.

Stephen Bush is a small business finance expert and has provided candid commercial lending advice to business owners for more than 25 years. AEX Commercial Financing Group supplies small business financing and working capital management programs

Article Source: http://www.earticlesonline.com/Article/Credit-Card-Processing-and-Business-Cash-Advances/737489

payday loan BAD CREDIT OFFERS – Credit Cards Cash Advance Loans – By Your trusted Source home